Oct
01
French Labour law -Employee, executives, senior executives - Prud'hommes: the advantages to conciliate through the “scale of conciliation” (barème de conciliation) (article D. 1235-21 of the French Labor Code)

The law on "securing employment" of June 14th 2013 created, in the context of litigation relating to dismissal, a conciliation schedule allowing employees, in particular, to benefit from social and tax benefits.

Thus, Article L1235-1 of the Labor Code provides that "In case of dispute, during the conciliation provided for in Article L. 1411-1, the employer and the employee may agree or the conciliation board and the propose to terminate it by agreement. This agreement provides for the payment by the employer to the employee of a lump sum indemnity the amount of which is determined, without prejudice to legal, contractual or contractual indemnities, with reference to a scale set by decree according to the seniority of the employee. "

By Decree n° 2016-1582 of November 23rd, 2016, the conciliation schedule was modified in order to be more attractive for employees and to be more consistent with -vis the scale (on this optional date) in case of dismissal without cause real and serious.

This scale of conciliation is interesting for taxpayers, especially senior executives with a high salary and seniority because it allows to overcome the tax exemption limit of 6 PASS (238.392 euros).

This scale also makes it possible to avoid the lack of unemployment.

1) When and how does the flat rate of conciliation (bareme de conciliation) apply?

Article L.1235-1 of the Labor Code provides for the possibility for the parties to put an end to the dispute which sets them against an agreement found in the minutes of the Conciliation and Orientation Office.

The agreement must then provide for "payment by the employer to the employee of a lump sum compensation", the amount of which is determined by article D.1235-21 of the Labor Code, depending on the seniority of the employee at the within the company:

 

Seniority of the employee in the company

Applicable « Indemnité forfaitaire de conciliation »

Inférieure à un an

2 months of salary

Between 1 and 8 years

3 months of salary + one month per additional year up to 8 years seniority

Between 8 years and less than 12 years

10 months of salary

Between 12 years and less than 15 years

12 months of salary

Between 15 years and less than 19 years

14 months of salary

Between 19 years and less than 23 years

16 months of salary

Between 23 years and less than 26 years

18 months of salary

Between 26 years and less than 30 years

20 months of salary

Above 30 years

24 months of salary

 

 

 

Nevertheless, with regard to the letter of the text, it appears that only disputes relating to the termination of the employment contract of indefinite duration can benefit from this device.

Indeed, Article L.1235-1, paragraph 2 of the Labor Code provides that "The minutes recording the agreement constitutes waiver by the parties to all claims and indemnities relating to the termination of the employment contract provided for in this chapter. ".

Therefore, it appears that in the presence of a request for overtime, non-payment of wages or any other request not related to the termination of the employment contract, the flat rate of conciliation not intended to apply.

2) Tax and social benefits of the flat-rate conciliation (bareme de conciliation) indemnity

Recourse to the minutes of conciliation is advantageous for both parties, both from a fiscal and social point of view.

2.1) A tax exemption without the limit of 6 PASS: it is very interesting for the senior executives who perceive a high remuneration and which have a long seniority

First, the employee benefits from a tax exemption, total or partial, depending on the case, of the amount received as a lump sum conciliation indemnity.

In fact, article 80 duodecies (of French Tax Code) provides that the indemnities paid on the occasion of the termination of the employment contract and mentioned in article L.1235-1 of the Labor Code (relating to the scale of conciliation), are exempt from income tax, within the limits of the scale.

Thus, since the allowance paid corresponds to the scale, it is entirely exempt.

This allows to escape the cap of 6 PASS.

Example: a manager who earns 50,000 euros per month and with 30 years of seniority can benefit from a tax exemption up to 1,200,000 euros (50,000 euros x 24).

It is therefore very interesting for senior managers who have seniority, with a high salary.

If he had traded via a transactional agreement, he would have benefited from a tax exemption within the limit of 6 PASS, or 238.392 euros.

On the other hand, if the employee receives a conciliation indemnity higher than the scale, the fraction exceeding this scale is subject to tax.

2.2) Exemption from social security contributions up to 2 PASS: we remain in common law

Secondly, the conciliation allowance also benefits from an exemption from social security contributions within the limits of the scale and from twice the annual social security ceiling (ie 79,464 euros in 2018).

However, in determining the amount of the exempt allowance, the amounts already exempted from the termination indemnity (statutory, contractual or contractual) must be taken into consideration.

Finally, with regard to the CSG-CRDS, the flat-rate reconciliation payment will be subject to it if it exceeds the legal or contractual indemnity for dismissal or within the limit of the total amount excluded from the social contribution base.

3) Recourse to the flat-rate conciliation indemnity makes it possible to avoid unemployment

Recourse to the conciliation scheme also includes an interest in unemployment and especially unemployment.

In fact, since the sums paid to the employee, due to the termination of the contract (severance pay or transactional indemnity), exceed the amount stipulated by law, they are included in the calculation of the Pôle Emploi compensation differential ( Article 21 of the Unemployment Insurance Regulation).

However, this specific delay of compensation can sometimes have important consequences for the employees who can be found during 150 days (maximum) without being compensated.

The use of conciliation minutes allows the employee to limit this risk.

Indeed, the sheet 4 of the UNEDIC Circular 2017-20 of 24 July 2017 specifies the list of allowances excluded from the basis of calculation of the deferred.

Thus, the sums paid in the context of a conciliation statement are not taken into account for the determination of the specific deferral, within the limit of the amount provided for in the scale.

Example:

Mr. X is an employee with 17 years of seniority and a monthly reference salary of 2,000 euros gross. He is fired for simple misconduct and makes his notice.

In this respect, he receives a legal compensation of 9,620 euros for dismissal.

As part of an agreement following the dismissal, the employee receives an additional compensation of 30,000 euros gross.

The specific deferral of compensation is calculated by dividing the amount of supra-legal compensation by 92.6.

In any case, the deferred compensation can not be greater than 150 days (75 days in case of dismissal for economic reasons).

Hypothesis 1: compensation is paid outside the minutes of conciliation

Mr X having received 30.000 euros of supra-legal compensation, the total sum is taken into account in the calculation of the specific deferred compensation, ie:

30,000 / 92.6 = 323.

The employee must wait 150 days before being compensated (the deferred compensation can not be greater than 150 days).

Hypothesis 2: compensation is paid as part of a conciliation statement

The flat rate of conciliation provides a lump sum compensation of 14 months, or 28,000 euros.

Mr. X having received a supra-legal indemnity of 30,000 euros, only 2,000 euros will be taken into account in the calculation of the specific deferred compensation, ie:

2.000 / 92.6 = 21 days.

The employee must wait 21 days before being compensated.

4) Conciliation scheme and direct referral to the Labor Court (conseil de prud’hommes)

The Labor Code provides in certain cases (requalification of fixed-term, fixed-term contract or internship agreement, taking of act) the possibility of directly seizing the judgment office of the Labor Court.

In such a case, the employees do not benefit from a conciliation and orientation hearing, the case being brought directly before the Judgment Office.

Nevertheless, what happens when the parties intend to reconcile visas to articles L.1235-1 and D.1235-21 of the Labor Code?

The Judgment Bureau has the opportunity to meet in conciliation training, in particular to approve any conciliation minutes.

However, in such a case, it appeared that certain organizations, such as Pôle Emploi, considered that the approved agreement did not fall within the provisions of Articles L.1235-1 and D.1235-21 of the Labor Code. =

In order to ensure that you benefit from the tax, social and unemployment benefits of the Conciliation Schedule, it is therefore advisable to go through a voluntary presentation to the Conciliation and Orientation Office.

5) Voluntary presentation of the parties to the Conciliation and Orientation Office (Bureau de conciliation et d’orientation) (Article R.1452-1 of the French Labor Code)

Article R.1452-1 of the Labor Code stipulates that "The request to the courts shall be made either by an application or by a voluntary presentation of the parties to the Conciliation and Orientation Office".

In practice and as an example, before the Labor Court of Paris, it is advisable to contact the Registry for a BCO date.

The parties must then address to the registry the text of the PV that they wish to homologate, as well as the information relating to the parties (name, surname, legal name, addresses, nationality, profession, activity, collective agreement, legal representative, etc.). .

At the date of the hearing indicated, the parties must appear at the registry at 10 am, the case not being mentioned on the roll.

The parties are then heard by the conciliation board which homologates the agreement transmitted.

As for the other industrial tribunals, it is better to inquire beforehand to know the dates and hours of voluntary presentation.

 

Frédéric CHHUM, avocat and member of the Paris Bar Council (conseil de l’ordre des avocats de Paris)

CHHUM AVOCATS (Paris, Nantes, Lille)

e-mail: chhum@chhum-avocats.com

www.chhum-avocats.fr

https://www.instagram.com/fredericchhum/?hl=fr

.Paris: 4 rue Bayard 75008 Paris tel: 0142560300

.Nantes: 41, Quai de la Fosse 44000 Nantes tel: 0228442644

.Lille: 25, rue Gounod 59000 Lille tel: 0320135083

 

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